Strategy

The CEO Poll: It's worse than you think

Canadian business leaders on corporate fraud.

Business leaders give the federal mini-budget high marks.

Canada already has a less-than-stellar reputation when it comes to dealing with corporate crime. But the rate of fraud may be even worse than we think, according to a web poll of 125 leaders of Canadian businesses conducted by COMPAS Inc.

A large majority of the respondents (76%) believe the true rate of fraud is higher than the reported rate — but for different reasons. More than 40% said many corporate misdeeds are simply undetected, while 34% said companies have practical reasons for not reporting and penalizing dishonest employees. The CEOs felt that publicly acknowledging misdeeds could be embarrassing, risky or costly for the corporation, and also said company policies may not be clear enough as to what constitutes fraud.

“Definition of fraud varies from company to company, and sector to sector,” wrote one respondent.

The panelists put forth other reasons for the perceived pervasiveness of corporate crime, including the belief that prosecution is difficult, management may fear the consequences of not being able to successfully prove misconduct, and sentences in Canada are simply too light to be a deterrent.

A number of CEOs mentioned the value of whistleblowers, with one calling them “the most useful tool for fraud detection.” Protection for whistleblowers is needed, of course, and a few respondents noted the lack of such a system. “People are generally very reluctant to become known as a whistleblower,” wrote one CEO.

But as another respondent suggests, the trick is to prevent crime, not simply detect it: “A sound environment of high ethics is one where fraud has difficulty breeding.”